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Diana Company has a line of credit with Bay Bank. Diana can borrow up to $600,000 at any time over the course of the 2018 calendar year.
Diana Company has a line of credit with Bay Bank. Diana can borrow up to $600,000 at any time over the course of the 2018 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2018. Mott agreed to pay interest at an annual rate equal to 1 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Mott pays 5 percent (4 percent + 1 percent) annual interest on $84,000 for the month of January.
MonthAmount Borrowed or (Repaid) Prime Rate for the Month, %January $84,000 4 February 60,000 4 March (55,000) 5 April through OctoberNo change No changeNovember (40,000) 5 December (25,000) 4
Mott earned $45,000 of cash revenue during 2018.
- n income statement, balance sheet, and statement of cash flows for 2018.
